L. 116-260) was enacted. endstream endobj startxref The agreement also provides $12 million in state funds to support associated county administrative workload. How to solve business problems and mitigate the risks, Make your transformation deliver on its promise. 1557 to provide some relief.6, On March 27, 2020, the federal government enacted the CARES Act in response to the COVID-19 pandemic.7 Sections 1102 and 1106 of the CARES Act amend section 7(a) of the Small Business Act to create the PPP, through which up to $349 billion in funding was provided to businesses through federally guaranteed loans. SACRAMENTO Governor Gavin Newsom, Senate President pro Tempore Toni G. Atkins and Assembly Speaker Anthony Rendon today announced that they have reached an agreement on a package of immediate actions that will speed needed relief to individuals, families and businesses suffering the most significant economic hardship from the COVID-19 Recession. The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. Separately, the Governor and legislative leaders said that discussions are continuing on measures for the safe reopening of the states K-12 schools, including strategies to address learning loss caused by the pandemic. Our goal is to provide a good web experience for all visitors. 80. As the forgiveness of a PPP loan is excluded from gross income, for LLCs, the amount of the forgiven PPP loan amount does not come within the meaning of "total income from all sources derived from or attributable to this state" and should not be included in the computation of the fee. The COVID-19 is having a huge impact on the global economy, with manufacturers and the travel industry bearing the initial brunt as the impact expands. MTU3YmNhZDYyNDc5ZTczNDMyNzc0ZjU1YTI3NWRlZjg3OWVkNGRiYjAzNjUz All references to Section, Sec., or refer to the Internal Revenue Code of 1986, as amended. Spidell Publishing one of Californias leading continuing education organizations is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. On April 29, 2021, California Gov. GTIL does not deliver services in its own name or at all. 0 80's treatment of expenses paid with forgiven loan proceeds A.B. California's partial PPP conformity bill sent to Governor (04-26-21) The California General Assembly has sent AB 80 to the Governor, and he is expected to sign it. To be eligible, businesses must have: Employed 50 or less full-time employees Had gross revenue of less than $5 million in 2019 Assembly Bill 80 (AB 80) allows qualifying taxpayers to exclude from California gross income Paycheck Protection Program (PPP) loans that have been forgiven, and advance grants provided under the Economic Injury Disaster Loan (EIDL) program. He has 22 years of broad-based SALT consulting experience at the national and practice office levels in large public accounting firms. endstream endobj 277 0 obj <. I have already received forgiveness on my second draw, which was thankfully from a different lender, therefore reason 2 of why I was denied is invalid. Our NFT Playbook is a roadmap to addressing IP rights, business infrastructure and risk for media & entertainment companies and others. Sec. 2020) (available here). The agreement provides an additional $24 million for financial assistance and services through Housing for the Harvest a program providing support for agricultural workers who have to quarantine due to COVID-19. 1577 and how these changes impact their California tax liabilities. We are at a critical moment, and Im proud we were able to come together to get Californians some needed relief.. Spidell Publishing - one of California's leading continuing education organizations - is reporting that the PPP loan forgiveness exclusion enacted by AB 80 (Ch. 20 See A.B. To help guide planning, weve highlighted key topics under focus from regulators worldwide and what those developments could mean for business. In addition, the following provision is included in the agreement: The agreement restores previously enacted reductions, effective July 1st, for the University of California, California State University, the Judicial Branch, Child Support Services and for moderate-income housing. hbbd```b``Z " e1} Dl` ,r`BD* - hcHh]bo O>? 1577 or other California tax matters, please contact any of the following Deloitte professionals: Roburt Waldow, principalMultistate, Deloitte Tax LLP, Washington National Tax, +1 612 397 4487, Christopher Campbell, principalMultistate, Deloitte Tax LLP, Washington National Tax, +1 213 553 3072, Valerie Dickerson, partnerMultistate, Deloitte Tax LLP, Washington National Tax, +1 202 220 2693, Kathy Freeman, managing directorMultistate, Deloitte Tax LLP, Sacramento, +1 916 288 3392, Shirley Wei, senior managerMultistate, Deloitte Tax LLP, Washington National Tax, +1 213 553 1715. Private company boards should bring the backgrounds and insights to understand risks and opportunities and drive the business forward. These new provisions provide [f]or taxable years beginning on and after January 1, 2020, gross income does not include any covered loan amount forgiven pursuant to section 1106 of the [CARES Act], pursuant to the [Enhancement Act], or pursuant to the [Flexibility Act].17 For this purpose covered loan is defined as having the same meaning as in section 1106 of the [CARES Act].18 Thus, the Forgiven Loan Amount is not included in gross income for PITL or CTL purposes. Payroll Protection Program (PPP) loans have been a lifeline to businesses since the onset of COVID-19. 162 and 163) will be disallowed to the extent PPP loan proceeds are ultimately forgiven.5 Later in 2020, the IRS issued Revenue Ruling 2020-27 further explaining that taxpayers cannot deduct expenses paid with PPP loan proceeds if the taxpayer reasonably expects forgiveness of the covered loan regardless of the year when forgiveness occurs. The 2023 BDO CFO Outlook Survey offers critical insights to support strategic decision-making and help your company thrive. Golf is better when were all playing together. By showing up as I am, Im elevating my career. document.write(new Date().getFullYear()) California Franchise Tax Board. The agreement also partially conforms California tax law to new federal tax treatment for loans provided through the Paycheck Protection Plan, allowing companies to deduct up to $150,000 in expenses covered by the PPP loan. No Results Found. Rul. California conforms to the federal gross receipts test requiring a 25% or greater reduction in gross receipts and will therefore follow the rationale of this related federal guidance. & TAX CODE 17024.5(a); 23051.5(a). The agreement provides an additional $100 million in emergency financial aid for qualifying low-income students carrying six or more units, with award amounts to be determined locally and made available by early April. The agreement reflects a four-fold increase from $500 million to more than $2 billion for grants up to $25,000 for small businesses impacted by the pandemic, and also allocates $50 million for cultural institutions. ITIN taxpayers who also qualify for the California EITC would receive a total of $1,200. 297 0 obj <>/Filter/FlateDecode/ID[<681772630396424DB877BF5F6FFE419B>]/Index[276 36]/Info 275 0 R/Length 98/Prev 155748/Root 277 0 R/Size 312/Type/XRef/W[1 2 1]>>stream Scott Smith, State & Local Tax, National Technical Practice Leader, Business Restructuring & Turnaround Services, Total Tax Transparency & ESG Tax Strategy, Financial Institutions & Specialty Finance, California: Update to Paycheck Protection Program Loan Conformity, Do Not Sell My Personal Information as to BDO Investigative Due Diligence. NmIyYjY1ZGFjODY4OTViMmNkMGJiYjAzM2JjYTBhMDJhZDYyYThmNTg3Yjcw GTIL is a nonpracticing umbrella entity organized as a private company limited by guarantee incorporated in England and Wales. California law excludes PPP loans forgiven under the CARES Act from gross income, Telecommunications, Media & Entertainment, Background on federal legislation relating to the PPP, Overview of notable changes under A.B. Tax laws are ever-changing, which is why you need proficient tax professionals working with you and your business to ensure you are in compliance with the current tax laws. Please see www.deloitte.com/about to learn more about our global network of member firms. (209) 527-4247 (fax), https://www.grimbleby-coleman.com/resources/articles/265, 200 West Roseburg Avenue eligibility) criteria for receiving a second draw PPP loan for federal income tax purposes under the CAA.13 Although this requirement only applied to second draw PPP loans for federal income tax purposes, it appears to be incorporated as a general limitation for California purposes when determining whether a taxpayer is classified as an ineligible entity under A.B. REV. Fill the form below and we'll contact you to schedule an appointment: Grimbleby ColemanCertifiedPublicAccountants,Inc. California Conforms to Federal PPP Loan Forgiveness Rules. 1577, A.B. Forms, publications, and all applications, such as your MyFTB account, cannot be translated using this Google translation application tool. Do not include Social Security numbers or any personal or confidential information. (%mu9YS-+e"D3mU3]3|.efah4Yi^=|jmMg16^2*5+Qh . 1577 and how these changes impact their California tax liabilities. The agreement incorporates the Governors Golden State Stimulus plan to assist California households that have borne the disproportionate economic burden of the COVID-19 Recession those with incomes below $30,000, as well as those unfairly excluded from previous federal stimulus payments. 80, California Assembly, April 15, 2021. MzJiOWRiMDc3MWUyZjhhMGViZjEyNDFkNWI4MTg3ZTU3NWRmNjEzYWNjNmM4 How we work matters as much as what we do. 1577, 2019-2020 REG. 15 U.S.C. 80s gross income exclusion also extends to any Economic Injury Disaster Loan (EIDL) advance grants received under the CARES Act and the CAA.12, Though enacted later than many taxpayers would have liked, A.B. (CAL. 80 amends California law to operate more consistently with the federal CAA regarding the permissibility of deductions for expenses paid with forgiven PPP loan proceeds. 1577 attempted to do, A.B. Combined, the agreement represents a total of 5.7 million payments to low-income Californians. The California Franchise Tax Board (FTB) plans to issueguidanceexplainingqualification and other requirements with respect to AB 80, and it is expected to include guidance for taxpayers that have already filed 2020 California individual or corporate tax returns. Onlyagross receiptsreduction inone quarterin2020mustmeet this25%thresholdtoqualifyforthe PPP loan expense deduction, assuming the entity is notpublicly traded. Matt Tierney and Andre Bourgon from Grant Thornton discuss how to execute a winning ecosystem strategy to manage insurance companies. N2QwYTc0NzQ2ZDg0NGM3YzhhYTM2YWM5N2IwZWUzODM5NzI2OTlkODM5M2Q5 The compromise builds on the initiatives in the Governors state budget proposal to provide cash relief to lower-income Californians, increase aid to small businesses and provide license renewal fee waivers to businesses impacted by the pandemic. Emergency Financial Relief to Support Community College Students. 2 A.B. MTFiZWE1MGQyMjlhOGEzMTY3ODc1ZGE4ODNiNmM1MGQxMzUzYTgxZjQxYTk5 636(a)(37)(A)(iv)(I)(bb). If your forgiven loan relates to an RRF, you are not required to meet these qualifications to deduct expenses. This content supports Grant Thornton LLPs marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. AB 80 applies retroactively to taxable years beginning on or after January 1, 2019. Energy companies can get ahead with fiscal discipline, ESG disclosure preparation and attention to cybersecurity, 2022 Energy Symposium speakers say. 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. NGQ1ZTQ2MjVlYTI2YTE3N2M5NzQ3NmNkNjNkMTc3M2JhZDE5OTA1OWZkYjc2 The treatment of deductions, basis, and tax attributes for California income tax purposes may differ from the federal income tax treatment. Note that the citation to the federal law presumably should be 15 U.S.C. MWFlZjU2ZDU1ZTQzYjZkMGVlNWYwYmRlOWI5MDdmZWZiNGE1OTMwZWRkY2Rj 211 0 obj <> endobj Identify how to treat the forgiveness of a PPP loan for tax purposes; Recognize how the IAS 20 grant approach is used to account for its PPP loan; Recognize actions that impact a CPA's independence in a PPP loan assistance engagement; Recall some of the rules pertaining to a CPA receiving an agent fee from a PPP loan lender, and Otherwise . See how we connect, collaborate, and drive impact across various locations. Further, AB 1577 applied only to tax years beginning on or after January 1, 2020. Sec. As a result, it provided no California tax relief for fiscal year taxpayers whose tax year began before January 1, 2020, but who obtained a PPP loan after January 1, 2020. SESS. But yesterday, the Calfornia Senate approved AB 80, which would make forgiven PPP loans tax-deductible - and give businesses a breather. 6 See CALIFORNIA SENATE COMMITTEE ON GOVERNANCE AND FINANCE ANALYSIS, JULY 24, 2020 (available here); CALIFORNIA ASSEMBLY FLOOR ANALYSIS, AUG. 29, 2020. 4 See P.L. 162, 163; CAL. People are having a hard time making ends meet. We are excited to finally have clarity on California's PPP loan forgiveness stance. Additional Aid for Individuals and Families. 2020), A.B. NDZkZjRjZDY4ODVjMjk3OGE5MjViODBjYjExOTliZWFhNzgwY2FjMTkzYjll endstream endobj startxref 21-17) does not apply to either first- or second-draw loans received after March 31, 2021. KServicing stated they were 1.) The information contained herein is general in nature and is based on authorities that are subject to change. Sec. However,AB 80 does not permitanindividual owner or corporation that is anineligible entity to deduct PPP covered expenses. Here are key facts about the PPP forgiveness process and how it impacts business owners owing less than $50,000. All rights reserved. 39 (A.B. Not-for-profit organizations and higher education institutions, Transportation, logistics, warehousing and distribution, Operation and organizational transformation, Blockchain, digital assets & Web3 solutions, Do not sell/share my personal information. We do not control the destination site and cannot accept any responsibility for its contents, links, or offers. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. SBA Forgiveness Portal. 80 has been satisfied to avoid being classified as an ineligible entity.. 116-136, 1105(i). Dana Lance is the Tax Practice Leader for the Greater Bay Area and the SALT Practice Leader for the West Region. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. On June 30, 2022, AB 194 was enacted which allowed an income exclusion for covered loan amounts forgiven pursuant to the Paycheck Protection Program Extension Act of 2021 (PPPEA) (Public Law 117-6). For taxpayers other than ineligible entities, A.B. 116-139, the Enhancement Act).8 The federal government also enacted the Paycheck Protection Program Flexibility Act (P.L. 2020-27. 116-260. The web pages currently in English on the FTB website are the official and accurate source for tax information and services we provide. Modesto, CA 95350, (209) 527-4220 (phone) Impacted by California's recent winter storms? To qualify for expense deductions, basis adjustments, and lack of reduction of tax attributes related to AB 80, you must meet the following qualifications. Mjg2ZDhmNTczMDFhNjc3MjY1YjcxNGU5YjlmODg2YzdmYjUyOWIyNjQ1Njhj Rather than deny deductions for expenses paid with forgiven PPP loan proceeds as A.B. Other special rules in the federal statute apply to entities that were not in business for the entirety of 2019. Under Section 1106 of the CARES Act, a recipient of a covered loan under the PPP is eligible for forgiveness of indebtedness on the loan in an amount generally equal to the sum of certain costs incurred and payments made during either the eight -week or the 24-week period beginning on the date of the origination of the covered loan, 18 A.B. 1577 disallows a credit or deduction for Loan Forgiveness Eligible Expenses to the extent of the Forgiven Loan Amount. California Governor Gavin Newsom onApril29 signedinto law legislation that generallyconformsthe states tax treatment of Covid-19 aid in the form of loans and grants with the federalindividual and corporate income tax treatment of such aid, including the CARES Act and the Consolidated Appropriations Act, 2021 (CAA). 80 amends California law to operate more consistently with the federal CAA regarding the permissibility of deductions for expenses paid with forgiven PPP loan proceeds. CFOs are more optimistic about the U.S. economy, according to Grant Thorntons 2022 Q4 survey, as they push for growth while being judicious about costs. PPP Forgiveness: Urgent News About Nonconformity in California, Key Tax Credits Have Expired: What This Could Mean for You, 79245 Corporate Centre Drive, La Quinta, CA 92253. Y2NjYmFmZTQyOGZhYjViZTYxMTQ0ODRiYWY5OGVkNzNlOWI1NWY0YzU0ZDVl Californians have been hurting. A.B. ODE0ZjA1OTZlMmYzNGViM2E4NWJiYTMwNzQ0N2I2YmVhZTE1MDVlNWJjOTJk Larger firms that took out higher loans would still be subject to the same ceiling of $150,000 in deductibility. 6 P.L. Your access to this service has been limited. Friday, September 18th, 2020. NTU5M2RhOWQwZTM1ZWU5NWE0YmI3YmJjZjMyYWI4M2IxYzcyNDVkMjY1MDc0 You must pay it back within either 3 or 5 years. California law does not conform to this expansion of PPP eligibility. To qualify for expense deductions, basis adjustments, and lack of reduction of tax attributes related to an SOV grant under SB 113, you must meet the following qualifications. 1577, addressing the treatment of PPP loans for tax years beginning on and after Jan. 1, 2020.7 Consistent with IRS Notice 2020-32, this legislation generally provided that forgiven PPP loan amounts would be excluded from the borrowers gross income, but that associated deductions would not be allowed for expenses paid with forgiven PPP loans. On July 4, 2020, Public Law 116-147 extended the authority to guarantee PPP loans to August 8, 2020. 12 CAL. 61; CAL. AB 80 conformity only applies to the exclusion from income for PPP loan forgiveness and EIDL advance grants. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. ZTg2N2Y3NGIyZGIwODA1ODY4OWI3ZDYzNWNjOTk5OTUyZmU4YTllMzc2OTVj The fourth quarter of 2020 and 2019 only becomes a measure in this test if taxpayers submit their PPP loan application on or after January 1, 2021. If you have any questions related to the information contained in the translation, refer to the English version. A medical researcher accelerated purchases by 45% with a new tech implementation plan. NGNiMzc0NzFlYmE5YTE4MGYwMjAwYmYwYWVlYWZhYjRhNGVjYzU0Njk2Zjhk Specifically, the new law states that [a]ny credit or deduction otherwise allowed under this part [(Part 10 for the PITL and Part 11 for the CTL)] for any amount paid or incurred by the taxpayer upon which this exclusion is based shall be reduced by the amount of the exclusion allowed under this section.19. YjNiOTAxNmNjNzdiZTlhZGIxNjNmYmViOWVmYThmZWI3YTRmMzM0ZmZiNjBj The new legislation supersedes AB 1577. SESS., 1 (see new CRTC 17131.8(b)), 2 (see new CRTC 24308.6(b)). 1577, 2019-2020 REG. National Tax Office Leader. Manufacturers need a two-pronged approach to manage risks. 2021-20 for federal purposes, we will follow the federal treatment for California tax purposes. 5 IRC Sec. This is alyx our streamlined concierge-enabled platform that connects real problems with the right resources and real solutions. On April 29, 2021, AB 80 (Consolidated Appropriations Act (CAA) Conformity) was enacted which allowed the additional income exclusion for second draw PPP loans and Economic Injury Disaster Loan (EIDL) advance grants and allowed the deduction of expenses, basis adjustments, and tax attribution adjustments for qualifying taxpayers, for tax years beginning on or after January 1, 2019. 80, deductions for expenses paid using PPP loan proceeds are allowed even when the loan is forgiven provided the taxpayer is not an ineligible entity. Under the legislation, an ineligible entity is a taxpayer that either: (i) is a publicly-traded company; or (ii) does not experience a 25% reduction in gross receipts in an applicable quarter of 2020 as compared to the same quarter in 2019.2, The PPP was created as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which provides forgivable business loans when the recipient meets certain eligibility criteria.3 Under the PPP, qualifying borrowers can apply to have some (or all) of their loan forgiven to the extent it was used for certain expenses such as rent, utilities, mortgage payments, and employee payroll. Your access to this site was blocked by Wordfence, a security provider, who protects sites from malicious activity. A.B. Joshua Josh is a State and Local Tax (SALT) Principal in the San Francisco office of Grant Thornton LLP. For additional information, visit Section 311 of the CAA, 2021, Revenue and Taxation Code (RTC) section 17131.8(g)(3)), and Small Business Administration (SBA) guidance. Credit: Spidell Tax, Analysis, and Education Go Back Print. According to the legislative analysis, this date was changed to ensure that all fiscal year filers are captured. Careful consideration will need to be given to these issues, as well as the need for documentation to support that the 25% diminution in gross receipts requirement of A.B. The PPPEA was enacted on March 30, 2021 and extended the covered period of the PPP from March 31, 2021, through June 30, 2021. It is unclearhowbusinesses that changed entity types during 2020will apply2019 gross receiptstoqualify for the PPPexpense deduction. ZmEwMjJhMjJhYSJ9 In its May 2021 online issueofFTBTax News,the FTB also instructedtaxpayersthat forgiven PPP loansshould notbeincludedas gross receiptswhen calculating CaliforniasLLCfeeand tax. Assembly Floor Analysis for A.B. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. AB 80 uses the same 25% gross reduction threshold qualification that was used for second draw PPP loans. Sign up to receive the latest BDO news and insights. Read about the challenges and opportunities that could lie ahead. M2EzM2JjMzhiMzQ0OGJhZjM2Y2YwYzkiLCJzaWduYXR1cmUiOiIzZWNjNmEy Drive maximum value across your supply chain. MGI4ODNkMGY5N2YxNzFmNjdlOWM5ZDYzNjFiMDIzZmZmMTNlMWUzMTg2NWEy As we continue to fight the pandemic and recover, Im grateful for the Legislatures partnership to provide urgent relief and support for California families and small businesses where its needed most, said Governor Newsom.

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